S/N1 Reo Ltd. Liability Co. v. City of New London

• Decision Date: 28 September 2000
• Docket Number: No. Civ.A. 3:96CV1601JCH.,Civ.A. 3:96CV1601JCH.
• Citation: 127 F.Supp.2d 287
• Parties: S/N1 REO LIMITED LIABILITY COMPANY, Plaintiff, v. CITY OF NEW LONDON, ex rel. Janice BALLESTRINI, in her capacity as Tax Collector; Barbara Berry, in her capacity as Tax Assessor; and Clark Van Der Lyke, in his capacity as City Clerk, Defendants. City of New London, Third Party Plaintiff, v. Federal Deposit Insurance Corporation, as receiver of Old Stone Federal Savings Bank, Third Party Defendant.
• Court: U.S. District Court — District of Connecticut

127 F.Supp.2d 287

S/N1 REO LIMITED LIABILITY COMPANY, Plaintiff, v. CITY OF NEW LONDON, ex rel. Janice BALLESTRINI, in her capacity as Tax Collector; Barbara Berry, in her capacity as Tax Assessor; and Clark Van Der Lyke, in his capacity as City Clerk, Defendants.

City of New London, Third Party Plaintiff, v. Federal Deposit Insurance Corporation, as receiver of Old Stone Federal Savings Bank, Third Party Defendant.

No. Civ.A. 3:96CV1601JCH.

United States District Court, D. Connecticut.

September 28, 2000.

Thomas W. Boyce, Jr., Jane Richardson, Faulkner & Boyce, P.C., New London, CT, Edward S. Weil, Eric S. Rein, James R. Edmunds, Schwartz, Cooper, Chicago, IL, for S/N1 Reo ltd. Liability Co.

Michael W. Sheehan, Conway & Londregan, Now London, CT, for City of New London.

Michael W. Sheehan, Conway & Londregan, New London, CT, Philip E. Masquelette, FDIC, Legal Div., East Hartford, CT, Charlotte M. Kaplow, Washington, DC, for Federal Deposit Ins. Corp.

RULING ON MOTION FOR SUMMARY JUDGMENT [DKT. NO. 87] AND MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION [DKT. NO. 90]

HALL, District Judge.

Now before the court is the third-party defendant FDIC's ("FDIC") motion for summary judgment [Dkt. No. 87] and the defendant City of New London's ("City") motion to dismiss for lack of subject-matter jurisdiction [Dkt. No. 90]. Some description of the procedural background of this case is in order. The defendant City of New London previously moved to dismiss the Amended Complaint of the plaintiff S/N1 REO Limited Liability Company ("S/N1") on the basis of the jurisdictional bar of the Tax Injunction Act. See Dkt. No. 31 at 3. In a written ruling on February 11, 1999, this court denied that motion on the ground that "the plaintiff qualifies for the federal instrumentalities exemption" from the Tax Injunction Act.¹ See Dkt. No. 48 at 9. However, the court offered the following caveat in its decision:

This court reaches the conclusion that it has jurisdiction with some hesitancy. There appear to be some issues of law on the merits that could affect whether there is jurisdiction. Further, the court is not satisfied that the factual record is fully developed concerning the plaintiff: its relationship to the FDIC and the extent to which the plaintiff's success in this action would further the government's interests. Prior to defendant filing the Motion to Dismiss at the court's suggestion (Arterton, J.), the parties had filed but not fully joined cross Motions for Summary Judgment. It is this court's view, that although it determines it has jurisdiction on the record before it, that the issue of jurisdiction may very well be part of its consideration of a renewed motion for summary judgment. 5A Wright & Miller, Federal Practice and Procedure: Civil 2d § 1350, at 235. Certainly, much of what plaintiff's counsel represented on the record during oral argument about the purpose and function of the plaintiff and its relationship to the FDIC and [Resolution Trust Corporation ("RTC")], should be briefed and made the subject of an affidavit as appropriate.

Id. at 9-10 (footnote omitted). In a footnote, the court noted:

For example, if `property of the corporation' in 12 U.S.C. § 1825(b)(2) does not include mortgage interests as the plaintiff claims, then this case would be more akin to Bank of New England [Old Colony v. Clark, 986 F.2d 600 (1st Cir.1993)] and serious questions concerning jurisdiction would be presented. The case cited at oral argument by the plaintiff, Matagorda County v. Law, 19 F.3d 215, 219 (5th Cir.1994), does suggest this issue will resolve in plaintiff's favor. Assuming the defendant chooses to raise this issue, it should have an opportunity to brief it.

Id. at 9 n. 5. The parties subsequently submitted extensive cross-motions for summary judgment on all the claims of the Amended Complaint [Dkt. No. 35]. However, at oral argument on June 21, 2000, counsel for the FDIC indicated that it was its position that S/N1 was not a "federal instrumentality" for the purposes of the exception to the jurisdictional bar of the Tax Injunction Act, 28 U.S.C. § 1341.² The FDIC also implicitly argued as much in its Memorandum in Support of its motion for summary judgment. See Dkt. No. 60 at 16-18.

On July 18, 2000, the court denied the cross-motions for summary judgment with leave to refile pending the court's determination of subject-matter jurisdiction, indicating that "[t]he court now has serious questions as to whether the Tax Injunction Act, 28 U.S.C. § 1341, bars jurisdiction over S/N1's claims and whether S/N1 qualifies for the judicially-created federal instrumentality exception to the operation of the Tax Injunction Act." Dkt. No. 86. The parties have submitted briefing [Dkt. Nos. 83, 84, & 85] on the jurisdictional issues raised at oral argument and in the aforementioned ruling denying the cross-motions for summary judgment.

On the basis of new information about S/N1's relationship with the FDIC and the FDIC's representations on this matter since its impleader into the suit, as discussed herein, the court now finds that the Tax Injunction Act bars S/N1's claim and that S/N1 does not qualify for the federal instrumentalities exception to the operation of the Tax Injunction Act. As such, the FDIC's Motion for Summary Judgment [Dkt. No. 87] and City's Motion to Dismiss [Dkt. No. 90] are GRANTED.

I. STANDARDS

On a motion to dismiss for lack of subject-matter jurisdiction, a court must accept all factual allegations in the complaint as true and draw all inferences from those allegations in plaintiff's favor. Jaghory v. New York State Dept. of Educ., 131 F.3d 326, 329 (2d Cir.1997). The court may not dismiss a complaint unless "it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitled him to relief." Id. Where the existence of subject-matter jurisdiction turns on a factual issue, however, the court is permitted to look beyond the complaint itself and may consider evidence outside the pleadings. See United States v. Vazquez, 145 F.3d 74, 80 (2d Cir.1998); Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997). The burden of proving jurisdiction is on the party asserting it. See Malik v. Meissner, 82 F.3d 560, 562 (2d Cir.1996).

Summary judgment is only appropriate when there is no genuine issue as to a material fact, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Galabya v. New York City Bd. of Educ., 202 F.3d 636, 639 (2d Cir.2000) (citing Fagan v. New York State Elec. & Gas Corp., 186 F.3d 127, 132 (2d Cir.1999)). The burden of showing that no genuine factual dispute exists rests upon the moving party, see Carlton v. Mystic Transp., Inc., 202 F.3d 129, 133 (2d Cir. 2000) (citing Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir.1994)), and in assessing the record to determine if such issues do exist, all ambiguities must be resolved and all inferences drawn in favor of the party against whom summary judgment is sought, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Heilweil v. Mount Sinai Hosp., 32 F.3d 718, 721 (2d Cir. 1994). However, "[t]he non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.1998).³

II. DISCUSSION

A. Absent an Exception, the Tax Injunction Act Bars S/N1's Claims.

The Tax Injunction Act, 28 U.S.C. § 1341, provides that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." It is well-settled that "[t]he Act prohibits declaratory as well as injunctive relief." Barringer v. Griffes, 964 F.2d 1278, 1280 (2d Cir.1992) (citation omitted).

It is also well-settled that, "[t]o come within the statutory ban, the remedy available in the state courts must provide the taxpayer with a full hearing and judicial determination at which [the taxpayer] may raise any and all constitutional objections to the tax." Id. (citation and internal quotation marks omitted). "The Supreme Court has ruled that the `plain, speedy and efficient remedy' exception to the act was designed only to require that the state remedy satisfy certain minimal procedural criteria.... Thus, the state remedy is measured according to procedural rather than substantive criteria, ... and the criteria are to be construed narrowly.... The opportunity need not be the best or most convenient one, ... and the taxpayer's failure to take advantage of the available state procedures does not mean that the state remedy is insufficient." Finizie v. City of Bridgeport, 880 F.Supp. 89, 93 (D.Conn.1995) (citations omitted).⁴

The court finds that S/N1's claims challenge the assessment, levy, or collection of a state or local tax, such that S/N1 is seeking "a federal-court ruling on a local tax matter, precisely the type of suit the Tax Injunction Act was designed to limit as to both declaratory and injunctive relief." Bernard v. Village of Spring Valley, 30 F.3d 294, 297 (2d Cir.1994).⁵ As courts in this district have already found, Connecticut provides an adequate remedy at law to challenge the assessment and collection of the taxes at issue in S/N1's Amended Complaint. See J & M Autobody v. Gavin, 27 F.Supp.2d 115, 117 (D.Conn. 1998); see also Finizie, 880 F.Supp. at 94-95.⁶

In fact, S/N1 admits that Count I is barred by the Tax Injunction Act unless an exception applies. Dkt. No. 93 at 5-6; see also J & M, 27 F.Supp.2d at 117 ("The State's filing of a tax lien against plaintiffs is clearly an act to collect taxes."). Moreover, despite S/N1's argument to the...